Job crunch

Employment generation in this country is a serious concern. On Wednesday President Pranab Mukherjee cautioned that a scenario opposite to job creation could spell disaster in the country. Speaking at a conference of the heads of educational institutions, he said job creation figures were the lowest in the past seven years. "The restlessness and frustration of youth manifest in unrest and upheaval. Let us not allow such a situation to appear on our horizon. We must turn our evolving demographic configuration into strength. For that, adequate job creation is a priority. The job creation figures of 1.35 lakh in 2015, which is the lowest in seven years, are not encouraging," the President said.

With machines fast replacing men, there is a paradigm shift, which needs urgent attention, he added. President Mukherjee makes two very pertinent points—lack of adequate jobs and the growing automation of the main job-generating sectors. During his election campaign in 2013, the BJP’s prime ministerial candidate made a solemn vow to the voters of India. “If BJP comes to power, it will provide one crore jobs which the UPA Government could not do despite announcing it before the last Lok Sabha polls,” he said. Aside from the growing frustration of the systemic rot that had seeped into the higher echelons of the UPA regime, it was the promise for greater employment opportunities that carried Narendra Modi all the way to the highest office in this land.

Although a lot has changed since Modi took office, the one thing that remains unchanged is the lack of jobs. In fact, under this administration, conditions have deteriorated rather substantially. Last month, the unemployment rate in India had shot up to a five-year high of 5 percent in 2016. According to a report by the Labour Bureau, the figure is significantly higher at 8.7 percent for women as compared to 4.3 percent for men. India's proud record as the fastest growing economy in the world regarding gross domestic product means nothing with job growth in the doldrums. In economics, one often comes across the concept of employment elasticity. This concept refers to the rate of jobs growth in relation to GDP growth.

According to a recent HDFC Bank report, employment elasticity in the economy is currently close to zero. In other words, for every one point rise in GDP, jobs grow only 0.15. Fifteen years ago, this figure stood at 0.39. Numbers posted by the Labour Bureau in June indicated that employment in labour-intensive sectors dropped the most in 2015 since 2008. Only 1.35 lakh jobs were created last year, as opposed to 4.9 lakh new jobs in 2014. The 67 percent fall in the employment generation in 2015 has raised many questions on the tall claims of the Prime Minister.

Moreover, the proportion of workers across agricultural enterprises in rural India has increased while the proportion of those working non-agricultural jobs has declined, as per the Sixth Economic Census. This is a worrying trend. Small companies are obviously in no position to take up the burden of job generation. They just aren't productive enough.

Meanwhile, many large corporate houses are submerged under a mountain of debt, sparking a circle of low growth, weak bank credit, job cuts, low output and low growth. With an additional 150 million Indians set to enter the workforce over the next 15 years, the pressure to create jobs and incomes will only increase on the government. The NDA government’s ‘Make in India’ plan, through which Modi claims will generate 100 million manufacturing jobs in the six years, has not taken off. The Reserve Bank of India, meanwhile, in its annual report, disclosed that foreign direct investment inflows in the manufacturing sector fell from $9.6 billion (2014-15) to $8.4 billion in 2015-16. Even the proportion of FDI in manufacturing sector against the total FDI dropped to a five-year low of 23.39 percent.

Growing automation in the manufacturing sector further reduces the scope of employment generation. Why would a factory owner need to pay additional workers when a single machine can do the job? The Boston Consulting Group, an American global management consulting firm, believes that robots will do 40 percent of manufacturing tasks in the years to come. A booming manufacturing sector will contribute to higher growth, but not necessarily more jobs.

Also, one has to be highly skilled in acquiring employment in the manufacturing sector. To obtain these jobs, good quality education is mandatory. But India’s education system has failed miserably in its bid to deliver quality education to India’s young populace. For example, an Annual Status of Education Report (ASER) published by the non-profit Pratham Education Foundation in 2014 revealed that only one in four children in Class V could solve a three-digit by one-digit division problem.

For those interested, the ASER report has detailed other such findings, painting a dismal picture of the state of education in India. With a fragmented marketplace, low job generation outside tier 1 cities, and rising income inequality, the prospects are rather frightening. “The erosion of jobs is like climate change," said Kaushik Basu, chief economist at the World Bank. "It happens slowly and so makes no news, but its impact can be devastating.” For a brighter future, the governments of the Centre and states need to come up with a definitive plan, keeping in mind the medium and long-term job generation targets.

Despite the job crunch in the economy, the government decides to implement an ill-planned ‘demonetisation’ drive, which has hurt employment intensive segments of the economy—mining, construction, textiles and garments, leather and gems, jewellery. Let’s not forget the informal sector, which accounts for 45 percent of India’s gross domestic product and 80 percent of employment. Without doing anything to check corruption or tax evasion, the government has disproportionately penalised the informal sector and the millions who have painstakingly saved up money to meet future contingencies.

“The magnitude of the cost obviously depends upon the speed at which the currency replacement happens, and also on the processes that are used for the replacement,” say Pronab Sen, the Country Director of the India Central Programme of the International Growth Centre. “At the moment, neither holds much cheer, especially in rural and semi-rural areas. The officially projected best-case scenario is three weeks, which is a lifetime for the poor and indigent.” Where does the government go from here? Only time will tell.